Good morning. I am former press secretary Mike Toledo from President Joseph Estrada's administration.
Good morning. I'm former spokesperson Margo Gosto, also from President Joseph Estrada's administration. And we are the spokes.
Welcome back to the Philippines, Attorney Mike. I missed you so much.
Same here, the Phil Mutual. You have been abroad for how long and where did you go?
Well, not too long. A few business trips that I had to attend to, but at the same time, all work, no play. Sideline enjoying a few bottles of good wine. That's another episode altogether.
So many things happened while you were away.
I know. I know. I know. And then, but I kept track and I kept track of you as well. But you know, let's not talk about me or my trip because you know today we are indeed very lucky. We're so blessed because it's not easy to get this man. In fact, if I'm not mistaken, he has not been interviewed for such a long time, but he gave us an opportunity for being with us here this morning on the spokes.
Yes, he rarely, rarely gives interviews. So, of course we do have one thing in common, which is that we all helped with President Joseph Estrada. And so, we're kind of like family. That is true. That is true.
So definitely ladies and gentlemen, there is no doubt one of the most influential economic minds in the Philippine government. And let me just add he is one of the most honored and awarded Bangko Sentral governor. He has served four presidents. Secretary of DBM, Secretary of Finance, Governor of Bangko Sentral, and now he's a member of the monetary board. One of the six members of the monetary board.
And he started during the administration of President Cory Aquino.
Correct. And then he moved on as Secretary of Budget of the administration of President Joseph Estrada. And he may be the only one who was Secretary of Budget twice.
Exactly. Because he also became Budget Secretary during the time of President Rodrigo Roa Duterte. Correct. And as if that was not enough, he was made Governor of the Central Bank.
Indeed. And so, and it didn't even stop there. He became Finance Secretary under the term of administration of President Ferdinand Marcos Jr.
Indeed. And now he is with the monetary board.
Definitely if a talent is identified, it crosses different administrations. So ladies and gentlemen, this morning, Secretary Ben Diokno, welcome to the spokes, Secretary Ben.
Thanks Mike and Margo. The way you describe me, I'm up to 78.
But you don't look a day beyond 59.
59. 59. Senior citizen. Oh, unlike our pesos already passed the senior citizen, but we'll touch on that later on.
Yes, it's really such an honor, MBM Ben. And of course as you know we have a lot to talk about and maybe we can also go through each of the decades that you served. As you know we have been experiencing great inflation. It was just announced last week our 7.2% inflation and we were saying that it's because of the Iran war and maybe we can do a comparison with the past administrations because you've been through all of those administrations. But before that let's get to know Governor Ben. MBM, you know we call him now GSM, correct? Governor, Secretary, Monetary Board Member, GSM.
GSM Miguel. But you know, Margo and PB, a lot of people don't know this but of course the Diokno family is well known in government and they're from Batangas. And how are you related to Batangas?
Yeah we're curious how are you? I've been wanting to ask you this even when we were together during the time of President Erap now, but I never had a chance to ask. So now I'm asking it on national TV. How are you related to former Senator Jose Diokno and of course the current congressman, good friend of mine, Chel Diokno?
Okay. As far as I can remember, his father, the father of the senator and my father are cousins.
To what degree I don't know. His father was the Supreme Court associate justice, remember?
Correct. Correct. Diokno.
Yes. And so, and then my cousin, my first cousin, Roberto, who's a former congressman and later RTC judge in Makati, who was his chief of staff when he was senator. So we're kind of close too. Okay. And my father himself was a former provincial board member and acting governor of Batangas. So that's as far as I can remember.
I see. I see. So it's a family of luminaries. There's a legal luminary and there's a financial and economic luminary.
And then he also became Secretary of Justice if I'm not mistaken.
That's right. During Macapagal, right, yeah.
Yeah. Aside from Batangas, of course, you are now a professor emeritus at the University of the Philippines. Before joining government, I think people first got to know GSM Ben as a professor of economics at the University of the Philippines. One of the most respected economic professors I think, sir. Who are your great students, po? Your students?
No, no, no, Mina was my professor.
Not that old. But many former secretaries of the Department of Budget and Management as well or maybe even the Central Bank.
And in fact the current acting secretary, Amenah Pangandaman, was also your student.
Also your student. Yeah, the secretary.
Did you have other more, more internationally known students?
Yeah, you, I, I took a few units in my pre-law, I took a few units in economics.
And you were his student also?
No, I was not. I didn't have the pleasure or the honor or maybe the age difference is not that much. But the thing is, you were one of the, I know, the most respected professors at the university. You know, to name a few like Winnie Monsod and etc, etc. But what, when you left, what actually made you leave full-time teaching? What made you decide to leave the academe? Because a lot of academics also would rather just stay in the academe and not go into government service. But what made you decide?
I think a more interesting question is why did I become an academician? Because I started as research assistant at the local government center, UP College of Public Administration. After my first course, right? Yes. And then later on I joined the Senate, not a senator but a subject matter specialist. Yes. In the committee on finance. Yes. And then when martial law was declared, they abolished Congress. Yes. So I'm jobless. So I was looking for a job. That's when I decided to become an academician. I joined the UP School of Economics. Yes. At that time, 1972, I think. And so that started my academic career. And then your question, what made me decide to leave the academe and join government? I retired. Okay. I was, but you know we have a system like the US where an academic can join the government and then return without losing his tenure.
Yeah. So during Cory's term I was asked by Bert Romulo to join DBM. Yes. And at the time Bert Romulo was budget minister. But at that time I was budget minister and he asked me, can you prepare a budget? Because he fired all the Marcos men, right? Senior people, yes. And he's looking for somebody who can prepare the budget. I said, I don't know how to prepare a budget but I'll try. And so he got me. And then that started my career under Cory. And then later on I became, well, I left Cory, I went back to the university and I was at the university during the entire term of Mr. Ramos. Yes. And but I was the fiscal advisor of the late Senator Angara who was the Senate President at that time.
Sir, during the time of President Cory Aquino, it must have been very, very difficult because I mean we were just recovering from, of course, after martial law and then was this also around the same time as the Gulf War that we have the oil crisis at that time?
During that, correct. During Marcos, that, it was so, I remember we were in a very difficult fiscal state. I think around 30% or one-third of our national budget goes to just paying of debt. And our tax effort was in the neighborhood of 9%. And so my first major act during the Cory administration was the 1986 tax reform program.
And it's, IMF called it the best thing that ever happened to this country.
Mhm. Because it was, if I remember right, there, that's about 25 tax measures.
Mhm. Okay. It was presented to the cabinet in one cabinet meeting. I presented it. Yes. And after my presentation, I was using not the powerpoint, Manila paper, acetate like in the church. Right. So after 30 minute presentation, I said, Mr. President, this is tax reform without tears.
Because our tax system is so bad that it's easy to reform it with several advantages. And after my presentation, she said, Are there any questions? There being none, approved 25 tax measures in one cabinet meeting.
That's amazing. Yeah. To be able to get it didn't have to go through Congress anymore.
No, no, because we were operating under the freedom constitution.
Yeah. At the time there were, so there was no Congress. Sort of saying it's better, we're better off without Congress, right? But just faster, it was faster. 25 tax measures and in fact after that the tax effort, the taxes as a percent of GDP grew to around, I think 16% from 9 to 16, 17% during the term of Ramos.
Now during the time of President Estrada, that's the time we were all together. Well, poster. So yeah, poster and I remember I finally recall really working closely together with then DBM Secretary Ben and it was an amazing synergy together with the other members of the cabinet really. So but during Erap's administration, what do you recall were the major reforms that you introduced and that were actually adopted and which resulted in positive growth for the Philippines and as well as institutional fiscal stability?
Well, as a budget, as a fiscal expert, I always focus on fiscal consolidation, making sure that we don't overburden the next generation with our debts, right? Yes. And so, that was my position when I was with Cory and that was my position under Erap. Remember, we're just coming out of the Asian financial crisis.
1998. And so I said we need to spend more, pump prime the economy, correct, so that it will recover and it did recover and in fact agriculture if I remember grew by around 6.5%, the highest growth in post-EDSA.
That's really true. In fact our host about two weeks ago, Tony Lopez, did say that it was during the administration of President Erap that agriculture actually grew its highest.
Correct. Masagana 99 was that was the first Marcos regime, FM. So it's really, he's really focused on programs that benefit the poor because food is a big chunk of the budget of the poor.
He used to always say hungry stomach no longer correct. True. Yeah. So it was like make sure.
So that was my, but actually my passion was really procurement reform which started during Cory's term. Correct. As far back as Cory's term. Why is procurement reform important? Because it constitutes about 25% of the budget. So this is not only hiring of consultants but also buying supplies and all the projects, you go through procurement process. And so that started during Cory. It was neglected during Ramos's term. I revived it during the Erap's term and then it was kind of neglected again and then when I came back under Duterte. Yes. So we, you know, my ultimate dream was that the procurement system will be just like buying from Lazada or Shopee.
Where you can get your car within days, not months or years. Yes. Or any of the equipment. Yes. And we're almost there. We can now buy cars within two weeks it will be delivered to you, that the transaction will be done in during the day. Two weeks it will be delivered to you.
So that's a major change but it took 40 years to do that.
40 years. You know government reform is so difficult. You just have to be, well you have to come back again and again and again to push the beyond administrations.
Yeah. Because first there was the Government Procurement Reform Act authored by the elder Angara and then the new Government Procurement Act which is under this administration was passed. So yeah, but the procurement reform act that was sponsored by Angara, that was an executive order by before because it took a while for legislation to take place.
Yes. So we're discovering the roles of each administration. Sometimes that's a problem. That's the issue. That's why sometimes it is a lot of people who join government coming from the private sector will be a bit disappointed because they want certain things done quick. They want to acquire certain equipment quick. They want to acquire people quick but because of the government procurement law, but that is the law, it somehow there's delay. So to a certain extent sometimes I would wonder when the procurement law was passed there's a presumption that everybody in government is a crook. It makes it really very difficult for you. No. So, how do you balance that?
Pentel pen, paperclip. It takes a while. But that's the beauty of the new government procurement reform. The new government procurement.
It's called marketplace, right?
E-marketplace. E-marketplace. You can just, as I said, you can just pull down. Yes. Say I need 12 cars. Pull down. Within two weeks it will be delivered.
Administration. At the end of the day during the three administrations I was budget secretary, I'm glad it was implemented. Now when I moved to BSP somehow the military and the local governments, rent seeking, secretary continued it.
We were together during the, and so to your credit sir and to the credit of Segmena it has been hailed in the world as the most, biggest anti-corruption measure in recent history. That is true. So that's to the legacy of BBM also. Can you imagine that? If you're from the private sector, you'll be discouraged by this difficulties in procurement. Yeah, but you quickly touched on President Duterte and then you said yeah some of the things that you did during Duterte's time you continued President BBM. But when you were BSP governor in 2019, what were your plans and actions when the world actually plunged into COVID? I mean it was like a question when having served as budget chief under Cory and then Erap and then Duterte.
I thought the transfer to BSP was a walk in the park. Now, little did I know that COVID is coming. Yes. And came next. Nobody knew. So, to me my major contribution there is, as a fiscal guy, I know that given the situation the government will be hard up. No, very much hard up because number one the economy will slow down as a result of COVID. When the economy slows down, revenues will decline. And then at the same time, you need a lot of money for the vaccine. Yes. And the Aayudas for the jobless and those who were locked down, right? Yes. And so they need money. Yes. And so I, the BSP monetary board, I asked them to give the national government 540 billion pesos. That's equivalent to around 10 billion US dollars. Yes. At that time, yes, interest free. Yes. But that's in the law. Under extraordinary circumstances the BSP may assist the national government and we did.
So you essentially saved the economy I think at that time we already hit negative GDP.
Right. And then that's 540 billion and then but that's not all, that's not all that the total assistance to the economy that we did during my time was around 2.3 trillion pesos.
And so while the economy went down, at least we were able to recover quickly. And to me the best metric for that COVID-19 is number of deaths per thousand population and you can check that with the John Hopkins statistics. Yes. And we did very well.
Okay. Yes. I think you won an award, tama sir, at that time.
Because at that time it is the tradition in central bank is you want the policy to be deliberately vague. Yes. You don't want to be very specific. So that, yeah. Yeah. That's, but I said no, I want to be transparent. Yes. And during my time during the COVID term, I was holding press conference every week to keep the public know that we're behind your back. Don't worry, BSP is here. Yes. And so I say I won the global central banker of the year.
And also the Asian central banker.
I think it was because of your efforts sir at the BSP helping the Duterte administration that we were able to become one of the most resilient countries during the pandemic.
Maybe you could tell us about the bounce back, like how were we able to go from minus 9 and then when you were finance secretary sir we hit 7.6% GDP, correct?
Yeah. Historical. Yeah. My move from BSP to the Department of Finance was kind of controversial, right? Yes. Yes. Why? Why move from, you know, the salary of the central bank governor? It's all over, right? Why did I accept that secretaryship of finance and well, the story goes a long way. During Erap's term, yes, I was about to go to Canada as visiting professor and then I had the house there already. Yes. And then he offered me this job. Okay. Secretary of Budget. And I said wait a minute I have to consult with the ambassador of Canada. Yes. And the ambassador of Canada told me that you know in our country in Canada if you're offered such a position it is your patriotic duty to accept. Accept. So you got to serve your country. Serve your country. I went back to Erap's. I see. Yeah. I so I miss Michael Jordan.
So come 2022 did you also feel like it was your patriotic duty to accept?
Yeah. Yeah. That is kind of demotion in pay but it's a bigger responsibility. Yes. You know we, there's a treasury secretary in the US. His name is Janet Yellen. Yes. Yes. Of course. To serve as treasury secretary. That's the secretary of finance. To serve as central bank governor or Fed. That's CB governor and she was a professor at the University of Berkeley, UC Berkeley. Yes. And at one point we met in San Francisco and she asked me which of the three positions do I prefer. And I said being professor, that's my first.
Yeah. But you know to your credit sir, I think when you became finance secretary that 7.6%, 6% was the highest in 45, 46 years of the Philippines.
My major contribution under the Marcos administration was that I prepared what is called the medium-term development expenditure framework.
That's a six-year plan up to 2028. That's the north star of the Marcos administration. The objective there is to again fiscal consolidation. We want to reduce the debt to GDP ratio to around 60% by the end of this term and that we want to limit the deficit to GDP ratio to around 3%. Why am I worried about debt and deficit? You know what, in government, any way you finance the government, it's taxation. Yes. Of course the most obvious is you collect taxes. The second way to finance the government spending is you borrow money, but that's a tax on future generation. Exactly. If you use it now, the future generation will have to pay for it. And that third way is through inflation by higher deficit. That's inflationary. That's called inflation tax. Okay. So that's how I work. Okay. So when I prepared that MTFF, that is supposed to be, and it was embraced by the president and Congress, they adopted it.
Now unfortunately or regretfully they took their eyes off the ball and they got other ideas.
So now we're down to the latest 2.8.
The latest number is 2.8. Of course, also because of global headwinds. A lot of people would want to know exactly looking at the current situation in the Philippines. Now, is the Middle East crisis, the oil crisis triggered by the war in Iran and Israel and the United States. Is this, in your view, in your opinion, from your experience, is this a tougher challenge than the pandemic?
No, no, no. That does not compare with the pandemic. Let's leave that hanging.
But please don't answer yet. We'll take a short break. We'll have you answer later on when the spokes returns after this break. Don't go away. Stay with us.
And the spokes is back still with monetary board member, former governor and former secretary Benjamin Diokno. So we ended with a hanging question, sir. Looking at the current economic situation of the Philippines. Is the Middle East oil crisis a tougher challenge than the pandemic?
